CTC Awareness Day Special
The U.S. Government has done something really cool, and today is the day to celebrate!
Today is an important day for three reasons:
It is the first full day of Summer
It is my birthday
But most importantly…
Now you might be asking yourself: what is the Child Tax Credit? Why does it have an awareness day? How should I celebrate?
Well, fear not dear reader, because I am about to tell you about the coolest expansion of the welfare state since the Great Society.
What is the Child Tax Credit?
In 1997, as a part of the very sexily-titled Taxpayer Relief Act of 1997, Congress introduced the Child Tax Credit, or as cool people call it, the CTC. It offered parents $500 per child in the form of a nonrefundable tax credit.
Here’s a quick if simple explanation of what that is because tax policy can get in the weeds very quickly. I’m going to try to keep this straightforward so long as all the tax wonks reading this promise not to get mad at me. A tax credit is essentially a discount on the amount of taxes you pay. So a $500 tax credit means you pay $500 less in taxes. When a tax credit is refundable, then if you pay less in taxes than the total amount of the credit you get a “refund” of the difference. So a $500 refundable tax credit means that if you only owe $100 in taxes, you will end up paying $0 in taxes and receiving a check for $400 from the IRS; if the credit is nonrefundable, you still pay $0 in taxes but miss out on any additional discount. Before you ask, yes, this is overly complicated and yes, it would be better to just send people a check instead of this weird credit system1.
The CTC2 was an acknowledgment by the U.S. Government that having kids is very expensive and because children don’t have a say over how much their parents make, society ought to give children money to help them not starve and afford clothes and blankets and whatnot. It’s a very common type of welfare in European countries, where most governments don’t treat poor people like they’re gross. It was a good idea, except that like almost everything passed in the 90s it was a mixture of small, overly means-tested, and restricted for the poorest of the poor, which severely limited its effectiveness.
As inflation carried on and elections passed, the CTC was eventually expanded and reworked until its last major pre-COVID reform in 2017, wherein the credit was expanded to $2000 per child, $1400 of which was refundable. The credit was only accessible to those making over $2500 a year.
This was not great. Under the 2017 law, 27 million children whose families were too poor did not receive the full credit. Yes, you read that correctly. Under the 2017 law, the government decided if CHILDREN had families that were TOO POOR, they shouldn’t get relief3. Not only that, but the size of the relief, $2000 per child, was still too small.
However, as it did for so many issues, the Coronavirus Pandemic set a new political equilibrium in which we, or at least Joe Biden and congressional Democrats, finally decided to stop treating poor people as if they were gross.
As part of Biden’s American Rescue Plan, the CTC was massively expanded. The credit was raised to $3000 per child aged 6 and above, and $3600 per child under the age of 64! Not only that, but the credit was, for the first time ever, available in all U.S. territories, included 17-year-olds as children, and (this is huge) fully refundable!
The benefits of the expanded CTC start coming out as an advance in just under a month, with the first half of the benefit given on the fifteenth of every month starting in July and ending in December, and the second half of the benefit given out as a lump sum in 2022. (This monthly rollout is really great, because it has a smoothing effect on families’ finances, making sudden expenses like medical bills or rent hikes much more manageable).
Why does the CTC have an awareness day?
There are three reasons why CTC Awareness Day is such a great idea:
The expanded CTC is great and we should celebrate good government helping people who need it
People who are eligible for the expanded CTC should know what they need to do to receive it
Currently, the expanded CTC only lasts for the year!
Let’s start with the first point. Currently there 11 million American children living in poverty, that’s one in every seven children in the United States. You shouldn’t need a study to tell you that child poverty is bad, but if you do, here’s one that shows that it damages physical and mental health, here’s one that shows it lowers test scores, and here’s another that shows it permanently reduces future earnings.
Here’s the great news. The New CTC would reduce child poverty by 45%. 45%! That’s almost five million kids! Combined with the rest of the American Rescue Package, you are looking at cutting American Child Poverty in half. That is legacy-defining. That is worthy of celebration.
However, not every parent is automatically enrolled in the program. If you filed a tax return for 2020 or 2019, congratulations! You’re all set. If you haven’t, please go to this website5 for directions on how to qualify for the money your government owes you!
Finally, this fight is not yet over. The current CTC expansion only lasts for this year. But there is movement in congress to make it permanent.
What can you do to celebrate?
I am so glad you asked. First and foremost, spread the good news! Share this article or any other article that talks about the CTC. Post, pin, Tweet, etc., every little bit helps. The more people know about this, the more likely they are to make sure they get the money, and the more likely politicians are gonna make sure it sticks around.
Secondly, call your congresspeople. You can find the contact information for your House member here, and your Senators here, and tell them you want to see the expanded CTC remain in place.
All of that said, I hope everyone has a great summer day, a great my-birthday, and above all else, a fantastic CTCAD!
Bizarrely enough, the person championing sending straight-up checks is Mitt Romney. For an interesting article on the value of simplicity regarding benefits, check out this great piece by Dylan Matthews
You are now officially a cool person for knowing what this means right off the bat
See what I mean about the U.S. treating poor people as if they’re gross?
There are limits on the benefit for higher-income families. For more information check out this, or look at the graph above
Like everything else the U.S. Government does, there are problems. The website for non-filers is apparently really bad, especially on mobile phones. If you don’t have a computer at home, check your local library or contact me and I will try to help or find someone who can.
This was great! Looking forward to learning more from you, Young-Ben.